Concerns that the UK is going to be forced to withdraw from the EU at the end of 2020 without a favorable trade agreement has pushed the GBP/USD to the $1.31 level. Last week's rally after the UK general election, with a Pound moving past the $1.35 level, is clearly now in the rear view mirror, The realization that Boris Johnson intends to play hardball with the EU leadership has weighed on Sterling. After the formal withdrawal date on January 31st, the UK and EU will need to find common ground and the Prime Minister believes that it will be the leaders in Brussels who are likely to “flinch” and accept whatever is then on the table. FX traders are dubious that that will, in, fact, be the case, and thus are taking a more wait and see approach.
In London trading at 11:11 am, the GBP/USD was trading at $1.3099, a gain of 0.133%, moving off the session peak of $1.31287. The EUR/GBP was higher at 0.8501 Pence, up 0.0706%; the pair has ranged from a trough of 0.84774 Pence to a high of 0.85090 Pence.
Markets Await BoE
Data released on the UK economy shows continued turmoil, with November's retail sales figures missing analysts' expectations across the board. Markets will be reacting later today to the Bank of England's latest policy decision. Analysts are predicting that the Monetary Policy Committee will essentially stay the course as regards interest rates and the asset purchase facility, holding both at 0.75% and ₤435 billion, respectively.